Economic theories are often fitted directly to data to avoid possible model selection biases. We show that embedding a theory model that specifies the correct set of m relevant exogenous variables, x{t}, within the larger set of m k candidate variables, (x{t},w{t}), then selection over the...

This paper discusses model based inference in an autoregressive model for fractional processes based on the Gaussian likelihood. We consider the likelihood and its derivatives as stochastic processes in the parameters, and prove that they converge in distribution when the errors are i.i.d. with...

We derive the optimal hedging ratios for a portfolio of assets driven by a Cointegrated Vector Autoregressive model with general cointegration rank. Our hedge is optimal in the sense of minimum variance portfolio.We consider a model that allows for the hedges to be cointegrated with the hedged...

We derive the optimal hedging ratios for a portfolio of assets driven by a Cointegrated Vector Autoregressive model with general cointegration rank. Our hedge is optimal in the sense of minimum variance portfolio. We consider a model that allows for the hedges to be cointegrated with the hedged...